Congestion and Residential Moving Behaviour

In this paper we study how congestion and residential moving behaviour are interrelated using a two-region job search model. Workers choose optimally between interregional commuting and residential moving to live closer to the place of work. This choice affects the external costs of commuting due to congestion. The welfare maximizing road tax is derived. We demonstrate that road pricing may not only reduce congestion but also increase total residential moving costs in the economy. One of the main consequences is that the road tax does not necessarily increase welfare.